![]() The letter claims that the removal of this copper from this market, and more as the ETF gains AUM, will result in a “substantial artificially-induced rise in near-term copper prices on the LME”.Īccording to the letter, this will hurt copper merchants and industrial users, such as fabricators (metal workers), who may require physical copper from LME warehouses to close out their hedge positions or to satisfy short-term needs for additional supply. The JP Morgan offering initially calls for the immediate removal from this market of as much as 61,800 metric tonnes of such copper, or the withdrawal of more than 30% of the copper available for immediate delivery worldwide. There is currently only around 200,000 metric tonnes of copper stored in LME warehouses, which represents a 57% drop in inventory since last year. This is physical copper available to satisfy short positions on the LME and is also used as a market of last resort by physical sellers who may have a surplus not otherwise committed to fabricators. The copper backing this ETF will, on purchase, be removed from the market.įor the most part, the only such copper available to satisfy the ETF’s requirements is copper in LME warehouses. If approved by the SEC, the NYSE will permit the JPM XF Physical Copper Trust to sell shares of an ETF backed by physical copper that must meet the London Metal Exchange (LME) requirements for copper available for immediate delivery. These views, believed to originate from Southwire, a major US manufacturer of electrical wire and cable, and Red Kite, a London-based hedge fund and metals trader, were presented to the Securities & Exchange Commission (SEC) in a letter sent on their behalf by New York law firm Vandenberg & Feliu. ![]() Red Kite partner Lilley told reporters at a commodities conference in Shanghai last week that copper prices had fallen further than he'd expected, suggesting it was a good time to buy the metal.Some industrial copper users believe that JP Morgan's physically-backed copper ETF could cause a “substantial artificially-induced rise in near-term copper prices on the LME”. Losses exceeded 2% in December, according to a performance update from Red Kite's Compass fund that was obtained by MarketWatch. Red Kite lost as much as 15% in January, according to three people familiar with the firm's performance. Copper for March delivery traded as high as $3.29 a pound intraday in December, then fell as low as $2.48 in January. However, after hitting highs in December, copper prices have slumped more than 20%. Last year, returns generated by the firm's Compass fund topped 90%. Red Kite has made millions of dollars betting on the price of metals such as copper since it was founded in January 2005. A representative at the firm's New York office declined to comment and said Lewnowski wasn't available to comment. It's not clear whether any Red Kite investors want to redeem. By getting more advanced notice, funds have more time to sell positions and return investors' money in an orderly fashion. Hedge funds sometimes extend redemption notice periods if they're expecting large investor withdrawals. "Given the current size of the fund we believe that to maintain efficient operation it is necessary to increase the withdrawal notice period," the firm said. 15 to get their money back at the end of the first quarter, the letter explained. ![]() The change will mean that investors have to send redemption notices to Red Kite by Feb.
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